LONDON (AP) — British telecommunications company Vodafone
agreed on Monday to buy Spain’s Ono for 7.2 billion euros ($10 billion)
as it seeks to expand operations across Europe.
The deal is part
of a broader trend of mergers and takeovers in Europe, where the mobile
industry is split among some 150 major operators crisscrossing national
lines — compared to just four in the United States.
Grupo
Corporativo Ono S.A. provides phone, mobile and television services to
1.9 million customers and has the largest "next-generation network" in
Spain, reaching 7.2 million homes, or 41 percent of the country.
Vodafone says Ono has abundant spare capacity, giving it space to
expand.
"Demand for unified communications products and services
has increased significantly over the last few years in Spain, and this
transaction – together with our fiber-to-the-home build program – will
accelerate our ability to offer best-in-class propositions in the
Spanish market," Vodafone Chief Executive Vittorio Colao said in a
statement.
Vodafone is flush with cash after agreeing last year to
sell its stake in a U.S. venture to Verizon for $130 billion in cash
and stock — one of the biggest deals in corporate history.
Monday’s
deal marks Vodafone’s second major acquisition in Europe, after its
purchase of Kabel Deutschland last year. Vodafone was attracted by Kabel
Deutschland’s extensive cable network, which it could use to expand its
fixed-line, broadband and television business.
The deal allows
Vodafone to accelerate its expansion in Europe, save costs in its
Spanish operations and take advantage of the rapid increase in the
adoption of unified communications products and services in the Spanish
market. Ono has invested approximately 7 billion euros in its network
since 1998.
Analysts were divided over the potential benefits of the deal.
"Spain
has been the source of losses for several quarters, and bundling
Vodafone’s mobile services with popular broadband and cable TV offerings
is the only realistic choice to drive up customer retention, new
subscribers and per-customer revenues," said Jason Sumner, technology
analyst at The Economist Intelligence Unit.
But James Barford, an
analyst at the London-based firm Enders Analysis, said the price was
high and was skeptical that the focus on "quad play" — the industry term
for bundling phone, broadband, mobile and TV services — will pay off.
"It’s
a little bit the tail wagging the dog in terms of justifying such a
high cost," he said. "There’s an assumption that ‘quad play’ is
essential, but there really isn’t evidence that consumers have a strong
desire to buy the fixed line and the mobile services together."
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Associated Press writer Sylvia Hui contributed to this story.
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